UnitedHealth Group's Value-Based Care Spend Hits $69 Billion

UnitedHealth Group signage stands in front of company headquarters in Minnetonka, Minnesota, March 9, 2016. (Photo: Mike Bradley/Bloomberg)

UnitedHealth Group says it’s paying almost half of its annual reimbursements – or $69 billion – to doctors and hospitals via value-based care models quickly replacing fee-for-service medicine in the U.S.

The nation’s largest health insurance company updated analysts on its value-based care efforts during this week’s third-quarter earnings call, telling Wall Street the health plan is well ahead of the pace needed to reach a goal of $75 billion by 2020. The $69 billion “represents a little under half of our total medical surgical spend,” Dan Schumacher, president and chief operating officer of UnitedHealth’s UnitedHealthcare business said.

UnitedHealth rivals Aetna, Anthem, Cigna and Humana and government health insurance programs Medicare and Medicaid are also escalating the shift from fee-for-service medicine. Value-based pay is tied to health outcomes, performance and quality of care of medical-care providers who contract with insurers via alternative payment vehicles like accountable care organizations (ACOs), a delivery system that rewards doctors and hospitals for working together to improve quality and rein in costs. In these models, doctors and hospitals take on more risk that they can streamline the care, improve quality and eliminate bureaucratic inefficiencies.

“We’ve been very successful in that migration towards a population orientation,” Schumacher told analysts Tuesday. “If you look at where that sits today, about half of our value-based spend is in the more progressive relationships that orient around population outcomes. Some of our more progressive relationships are actually with our ACO partners, and in those relationships, we work to share data, share insights, drive better coordination, close gaps and care for people.”

Across the country, value-based models are only expected to escalate, particularly as insurance companies become more integrated with providers of medical care. UnitedHealth owns Optum, which has a fast-growing healthcare services unit that is buying up doctor practices, urgent care centers and surgery centers across the country. Meanwhile, Humana has spent hundreds of millions of dollars on buying providers of outpatient care and the drugstore chain CVS Health earlier this month won preliminary U.S. Justice Department approval of its acquisition of Aetna, the nation’s third largest health insurer. CVS is paying $69 billion for Aetna, which has a goal to shift 75% of its medical spend to value-based models by 2020.

I've written about health care for three decades, starting from my native Iowa where I covered the presidential campaign bus rides of Bill and Hillary Clinton through the Hawkeye state talking health reform and the economy. I have covered the rise, fall and rise again of hea...